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  1. #1

    Rules for Financial Independence

    Here is a basic set of rules that I've followed for the past 30 years and I offer them for criticism and comment. They have kept my blood pressure low and allowed me to become financially independent.

    1) Spend less than you make (ie Mr Mcawber had it right) and do a detailed budget to track spending
    2) Save 6 months spending to an emergency cash account
    3) Max out your workplace pension, LISA, SIPP etc
    4) Buy low cost diversified investment funds like Vanguard LifeStrategy or an asset allocation with index funds and rebalance
    5) Avoid individual shares and actively managed funds, they are expensive and often risky.
    6) Avoid high interest debt, pay off the credit card in full each month
    7) Try to save 20% of your gross salary, hard I know but start with something and work your way up
    8) Maximize ISA then go onto regular investing accounts...still only using low cost index funds
    9) Be cynical about advice and educate yourself, read the wiki
    10) Don't fret about performance.

  2. #2
    I'd ad one that you've missed along with most others, which is to take a look at how you can make yourself valuable to employers. It's an awful lot easier to achieve financial security of you earn 50,000 per year than if you earn 20,000.

    Most people could be earning a lot more if they set their mind to it, and you should put at least as much effort into planning your career as you do into planning your investments.

  3. #3
    Add to (1) and remove (7) Dont increase your standard of living in line with rising income. Invest the increased spare money.
    Add (2.5) Define your life objectives and hence your financial objectives. If you want financial independence as soon as possible make it an explicit objective.

    Replace (4) and (5) with

    4) Treat all simple packaged investment strategies with scepticism. They all have advantages, limitations and drawbacks - identify and understand them.
    5) Choose appropriate level of savings, investment strategies and investments to meet your defined objectives

    8) Remove final phrase. It's covered by (5)

    9) Replace final phrase with: dont waste time reading that only serves to confirm your previously held opinions. Your reading should teach you something new. Knowledge is power.

  4. #4
    As far as I can tell, Warren Buffett just try to get other people to do the work. When he needs another car, he asks his daughter to get a second hand one. Once he buys a company, he lets them get on with it.

    I would love it if I could just hand my money over to somebody I can trust, knowing I will be in clover in twenty years time. If that were true, I would roam the world like a hippy, and come back to a comfortable retirement, having flouted all the rules.

    Theoretically, a good financial adviser will take your money and grow it, because he should know a lot more than you do. Sadly, even forty years ago, there were stories of accountants running away with your money.

  5. #5

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